September, 1999

From the Editor

Politics And Fine Wine

The success of the specialty-food industry is intricately connected to the refinement of the palate of the American consumer. The industry tends to get caught up in hot industry topics: the role of distributors, the way returns are handled and what function brokers serve. This is all well and good, but it’s also “inside baseball.” In the end, the issue for the trade is to encourage people to broaden and enrich their dining experiences. Inevitably, this brings us to wine. Food and wine are so intertwined that it is difficult to imagine wide appreciation for fine food developing without wide appreciation for fine wine.

That’s why a bill now before congress, threatening to retard the development of a broader wine-consuming base, is a threat to the specialty-food industry. The unconstitutional effort is also a concern for all Americans.

The gist is this: In Congress now is a ridiculously named bill: “The 21st Amendment Enforcement Act.” The 21st Amendment repealed prohibition. In doing so, the deal was made through a special clause to allow individual states to remain dry. The 21st Amendment imposed a ban on importing intoxicating liquors into any state “…in violation of the laws thereof.” The purpose was clear, to give the states the right to “opt out” of prohibition. Normally, free trade among the states is the rule. The idea here was to prevent a New York firm from exporting liquor to a state that had declared itself “dry.” Instead, this clause has been warped into a virtual repeal of the Commerce Clause.

What’s that? You didn’t realize that the repeal of Prohibition required some additional enforcement? Well, the truth is that the legislation in Congress has nothing to do with enforcing the repeal of Prohibition and an awful lot to do with lining the pockets of wine wholesalers that now have a cushy monopoly.

The new legislation is designed to give state attorney generals the authority to enforce their state laws in federal court. This sounds like legal mumbo-jumbo but actually is crucial. Most states have laws on their books whose only real purpose is to protect local wine wholesalers. These laws make it a crime to ship wine into a state without going through a licensed wholesaler. These laws restrict commercial trade, raising prices for retailers and restaurants and, ultimately, consumers, but they also restrict the boutique wineries’ ability to ship to consumers.

So “wine of the month” clubs and other similar mail-order operations are difficult to legally operate. Small boutique wineries, without large legal staffs and without the volume necessary to interest wholesalers, are legally precluded from selling to a national consumer audience. It is a situation designed to retard the American consumer’s access to wine from smaller sources and often in more rarified forms.

You might wonder what is the point of this new legislation if state legislatures have been able to so severely restrict wine shipping and protect their local wholesalers. Right now, the law being broken is a state law, which, generally speaking, is directly enforceable only in a state court. This leaves a state attorney general in an uncomfortable situation: If a small winery without operations in a particular state ships directly into that state, the state’s attorney general has access only to the consumer who made the purchase.

Attorney generals are politicians, often with interests in becoming governor, and suing some little old lady who happens to like a nice merlot not sold in her state won’t play that well on the local news. So the state attorney general wants access to the federal court system so he can directly go after the out-of-state winery and leave his poor constituent alone.

Congress should not facilitate such a thing. In fact, Congress needs to go back to first principles and ensure that the Commerce Clause of the Constitution, granting Congress the power to regulate commerce with foreign nations and among the several states, is used to build a free market among the states.

That means that the law should clearly declare that a state’s laws couldn’t be used to protect local wholesalers against direct shipment from out-of-state manufacturers. Sure, a state can choose to be dry, but if the state chooses to allow alcohol in, the state cannot parcel out market access as a political favor to powerful interests or to big campaign contributors.

In part, the specialty-food industry needs to be active on this issue because it is making it more difficult for consumers to access wonderful wines that would help build interest in specialty foods. But there is more. The logic behind the restriction on wines could be applied to any item…and it will be. There is too much money at stake with state-granted monopolies to think that only wine wholesalers will be interested. The specialty-food industry depends on a diversity of suppliers keeping interest high in our specialty-food departments. By the logic of the 21st Amendment Enforcement Act, that diversity will soon be sacrificed to state legislatures’ desires to attract support by parceling out largess. It is revolting, anti-consumer and anti-American.  FDM